Reference no: EM132867254

MetalWorks is a metal manufacturer that takes a variety of different metals and crafts metal home products including railings, specialty doors, and lighting fixtures. They are known for exquisite craftsmanship and creative pieces that can define a home. MetalWorks is considering purchasing one of two firms to help grow the company and increase profits. The first company is Mine and Refine, an iron and steel producer. The second company is Home Customs, a chain of retail stores that offers unique high-end home features.

Mine and Refine provides roughly 30% of Metalworks' raw materials. Primarily, this is wrought iron used in railings and doors. Since wrought iron is a commodity good, Metalworks buys it from Mine and Refine and three other providers based on price. Mine and Refine produces four different types of metal products for hundreds of different customers. Metalworks makes up about 10% of Mine and Refine's customer base. The majority of Mine and Refine's sales are done through a third-party platform that allows buyers to compare prices for similar metals in the same way that Expedia does for air travel.

Home Customs is a high quality, high touch retail home décor chain with 15 stores across four states. They maintain a variety of limited distribution items in stock as their customers want exclusive items. Home Customs will request custom creations from their suppliers as well. The custom creations pose challenges for most suppliers in terms of timing and planning but can be extremely lucrative. About 50% of Home Customs' sales are Metalworks' products. About 40% of Metalworks' sales are to Home Customs.

Describe the potential costs and benefits of each acquisition target. Select the correct acquisition based on those costs and benefits.